I recently saw someone say ‘We did the math and sending the kid to daycare would be break even’. When I inquired further, it turned out ‘break even’ meant they could have profited $12,000/year. Nothing wrong with being a stay at home parent, but a profit of $12k is not close to break even.
Disclaimer, we send our kids to daycare, expect pro-daycare bias.
If you are reading this and have an agenda, to prove that whatever you are currently doing is the best: Just do that. This article’s purpose is to be rational from a monetary perspective. If you are afraid daycare is going to teach your kid bad habits, money won’t change that feeling.
Here are your options to consider
While there is a monetary value to each option, there are some intangibles that should be considered.
During coronavirus, I ‘lived the dream’. Me and my 1 year old spent every day together, I built bridges and towers with his megablocks, we went outside, and… quickly this wore off and his fuss drove me to putting on baby phonics and count to 100 videos.
We typically see our stay at home mom friends have a Disney movie on TV in the background of our snapchats.
Recently I got a taste of the stay at home life as I had coronavirus and I watched my kids all day. I think stay at home is fun in bursts, and it may be fun when the kids are a bit older and can play more independently or tell you what they need.
I won’t put ‘daycare costs money’ as a con, because daycare allows me to work and make profit.
To calculate if daycare is profitable, find out the cost of daycare. 5 days a week is approx $15,000 per child per year in my area. Then find your after tax earnings (as an estimate take your yearly income and multiply by 0.7). Do yearly after tax income – cost of daycare. If your number is positive, daycare is not ‘break even’, it’s profitable. Consider that the experience you gain from working will pay dividends as well.
Example outputs, assuming 15k/child/yr, a tax burden of 30%. This doesn’t include daycare tax deductions, which were $8,000 per kid in 2021 and only $3,000 per kid in 2022.
1 kid x 15,000= 15,000, after tax income to profit $21,000
2 kids x 15,000= 30,000, after tax income to profit $42,000
3 kids x 15,000 = 45,000 , after tax income to profit $65,000
Enter your yearly cost of daycare:
Enter your yearly post-tax income:
To add qualities, here are pros and cons:
We use this to some extent, for 2 days a week, we have our parents watch the kids. There are pros and cons. Grandparents spoil the kids, but they get that 1 on 1 attention that they wouldn’t get from daycare. I also enjoy having our parents over, I like those days as much as the weekend. It also reduces our daycare bills slightly.
I’ve been offered support from friends and neighbors as well, mostly in the form of trading days of watching kids. This would require finessing around work schedules, so we end up using daycare instead. However, my job is flexible enough to do something like this. I’ve personally been impressed enough by my kid’s socialization at daycare that I don’t think I’d trade it for $20,000/yr… Hmm… when I put it that way, maybe I do need to consider ‘The Third Way’.
If you want to be a stay at home parent, why are you reading this article? You know in your heart what you want.
If you want to make profit and have 1 parent with a flexible schedule, you may be able to set up a system of friends, family, and neighbors to watch your kids.
If you want to make profit, do the math to figure out if daycare is a profitable choice. Even a slight profit will pay dividends with a stronger resume. On a similar note, make sure you are using rational decision making when choosing jobs, benefits disguise how low a job actually pays.